Manuel Suárez Mier*
Yesterday the most ambitious public spending plan (American Rescue Plan, ARP) in the United States history was approved, 1.9 trillion dollars that Congress sanctioned in a strictly partisan vote, now that the Democrats control both houses and the White House.
The ARP aims to help individuals and businesses that have suffered the brunt of the economic recession caused by the pandemic and stimulate the battered economy. His detractors point out that his goals are undefined, which will turn into huge waste and increased debt without improving the economy’s long-term prospects.
This plan has critics on both sides: Republicans who point out that the economy has already begun to recover and think that such a huge spending plan is not needed, while the more progressive segment regrets that it has been left out to raise the federal minimum wage to 15 dollars per hour.
What specific measures does the ARP include?
• First of all, contain the pandemic with a massive vaccination campaign, in which notable progress has been made since Biden came to power: 100 million vaccines have already been applied.
• $ 1,400 in “relief” for inhabitants earning less than $ 75,000 a year, in addition to $ 600 that was originally sent recently, and $ 1,200 from last year, which came with a letter from Trump as if it came from his checkbook.
• The unemployment benefits coverage is extended for 20 million unemployed people, which was to end at the end of March and which will now continue until August, in addition to increasing from $ 300 to $ 400 per week.
• $ 350,000 million to address the holes attributable to the pandemic in state and municipal budgets, especially those that depend on tourism and oil extraction, which have laid off 1.3 million employees.
• The proposal to raise the minimum wage to $ 15 per hour, double its current level, was rejected by the Senate “parliamentarian,” an expert in the history and procedures of what Congress can pass. This proposal, from the most progressive legislators, will be pushed apart from the approved package.
The debate about this gigantic “emergency” spending when the economy is already recovering at an appreciable rate recalls that between basic Keynesians who believed that any increase in public spending was desirable because it would incite more growth, and the classical economists who argued that such spending would only create more debt than would be paid off with higher taxes, inflation, and stagnation.
The most progressive wing in Congress, whose wayward aspirations have no limits, fears that this package could hamper one much bigger than they want to revamp America’s decrepit infrastructure, an effort in which Trump and Obama alike failed.
Meanwhile, the fiscal / GDP deficit reached 18% last year, and the federal government’s net debt exceeded 100% of GDP, exposing the great fragility of the US economy when interest rates start to rise.
Let’s see when this situation becomes crisis!
*Consultant in economics and strategy in Washington DC and professor at universities in Mexico and the US. Email: aquelarre.economico@gmail.com
This column is also published in Spanish on March 11, 2021, in the Excélsior newspaper, based in México City.